Ahead of his inauguration at the end of January, President-elect Donald Trump announced that Damac Properties, controlled by Emirati billionaire Hussain Sajwani, will make at least a $20 billion investment to build data centers in the United States.
What does this focus on data center expansion mean for stakeholders in the data center industry? This LawFlash outlines six key considerations from our Data Center Strategic Initiative co-leaders, Jane Accomando, Barbara Melby, and Ulises Pin.
Once critical funding like that in President-elect Trump’s announcement has been established, a key next step in data center expansion will be identifying viable sites in the preferred states, which will include land availability; proximity to power (as noted below), water, and labor; financial benefits (including tax and other credits); and community support.
This may result in land acquisition or leasing arrangements, followed by agreements among data center developers, design companies, and builders. Supply chain considerations regarding timely access to required equipment and resources are also top of mind.
President-elect Trump announced that the first phase of the data center project will be in Texas, Arizona, Oklahoma, Louisiana, Ohio, Illinois, Michigan, and Indiana, states with a mix of regulated and deregulated electricity markets. Power providers in all those states may need to take steps to ensure sufficient capacity for the operation of new data centers, including potentially building new power generation facilities.
In addition, there are a variety of arrangements that could be used to meet the enormous power needs of the data centers such as constructing new generation at the data center site, locating a data center at a preexisting power plant site, or executing a more traditional power purchase agreement.
Although details are scarce about the specific locations of the planned data centers at this time, the proposed Damac investment represents good news for telecommunications providers and digital infrastructure developers in the areas where the data centers will be located. Data centers require redundant and reliable fiber connectivity—in most cases more than three separate fiber networks—to transmit data in and out of each facility.
Damac does not appear to be a US telecom provider and thus, it will likely need to forge alliances/partnerships with existing US carriers to provide fiber connectivity to the customers of its new data centers.
Complex compliance considerations may arise when contemplating data center investment, development, and operations. Areas of focus may include federal, state, and local regulations relating to energy consumption and sustainability; environmental requirements; health and safety; security (including relating to critical infrastructure); privacy (including emerging artificial intelligence regulations); cross-border data and technology transfers; labor and immigration; and tax.
In addition to existing regulations, it will be important to watch for updated and new regulations as public interest and press coverage relating to data centers grows and as a result additional scrutiny.
Data center investors often think beyond the build to how operations will be handled. Operating a data center requires a range of agreements between the operator and its vendors, as well as between the operator and its customers. Top of mind considerations from an operator and customer perspective include supply chain limitations, system availability, operational resiliency, latency, physical and system security, and data protection.
President-elect Trump’s announcement of Damac’s investment may provide a preview of the upcoming administration’s potential favorable views towards additional data center investments in the United States, whether from US or foreign sources. Making the United States a hub for technology and innovation development has been a priority for President Trump and may indicate potential favorable federal treatment for foreign investments in this area.
Our data center lawyers work with all involved parties within the vast data center ecosystem—including owners, investors, developers, suppliers of power and connectivity, operators, equipment and technology vendors, and customers (from small companies to hyperscalers)—to support innovation and growth, safeguard data, minimize risk, and future-proof investments and operations in a data-driven world. Our practice is global, just like our clients. From Chicago to Delhi to Munich, Morgan Lewis data center lawyers can assist. Whether navigating the intricacies of addressing the growing concerns around energy consumption and sustainability, privacy, and cross-border data transfer regulations, or assessing risk profiles and allocation, our established track record means that we offer tactical, actionable insights into the operational and legal challenges clients in the data center space confront.
To learn more about the critical legal and operational considerations shaping the data center landscape, explore our Data Center Bytes webinar series.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following: